PERMIAN BASIN ROYALTY TRUST Material Event - What Happened

Hey there! Let's break down what's going on with the Permian Basin Royalty Trust, so you can understand it without needing a finance degree. Think of this as me explaining the news to you over coffee.

---

1. What happened? (The actual event, in plain English)

Okay, so the Permian Basin Royalty Trust just announced its latest monthly payment to its owners (we call them "unitholders" or "investors"). And the big news is, this payment is significantly lower than what they paid last month, coming in at $0.013198 per unit.

To put that in perspective, it's a pretty small payment. A major reason for this is that for one of their key properties, the Waddell Ranch, the costs of production actually exceeded the money they made from selling oil and gas. This means no money from Waddell Ranch was included in this month's distribution, and they're now in an "excess cost position" that needs to be recovered before future payments from that property can happen.

2. When did it happen?

This announcement came out on December 19, 2025. The payment itself is usually made around January 15, 2026 to anyone who owned units by December 31, 2025.

3. Why did it happen? (The backstory and context)

Alright, so why the change? For a "Royalty Trust" like this one, the payments are directly tied to how much oil and gas they sell and at what price. They don't actually drill for oil themselves; they just own a slice of the production from certain oil fields.

This lower payment is due to a few key factors:

• Waddell Ranch Problems: As mentioned, the Waddell Ranch properties had a tough month. Their total production costs were higher than the money they brought in from sales in November. This means they're currently operating at a loss for that property, and until they recover those excess costs, unitholders won't see any income from Waddell Ranch.
• Texas Royalty Properties - Lower Oil Volumes & Prices: For their other main asset, the Texas Royalty Properties, they saw lower oil volumes (less oil pulled out of the ground) and also received a lower average price for their oil ($60.17 per barrel this month compared to $63.38 last month). These figures mainly reflect production and pricing from September for oil.
• Natural Gas Helped (A Little): On the brighter side, the Texas Royalty Properties did see higher natural gas volumes and higher natural gas prices ($8.32 per Mcf this month compared to $7.10 last month, reflecting August pricing). This helped offset some of the losses from oil, but not enough to prevent a significant drop in the overall distribution.
• Expenses: After accounting for revenues ($933,086) and expenses ($139,390) from the Texas Royalties, and then general and administrative expenses ($138,836), the total amount available for distribution was $615,176.

4. Why does this matter? (The "so what?")

This is a big deal because the whole point of owning a piece of the Permian Basin Royalty Trust is to get these regular payments. Unlike a regular company that might reinvest profits or grow, a Royalty Trust's main job is to pass almost all its income directly to its owners.

So, if the payment is lower, it means:

• Less income for the people who own units in the Trust. This month's payment is quite small, directly impacting investors' returns.
• It highlights the volatility (the up-and-down nature) of these types of investments, as they're very sensitive to commodity prices and production levels.
• The Waddell Ranch situation is a significant concern. Having a property in an "excess cost position" means it's not contributing any income, and future income will first go to cover past losses, delaying distributions even further.
• It can be a sign of what's happening in the broader oil and gas market – if oil prices are down for them, they might be down for others too.

5. Who is affected?

Primarily, this affects the unitholders (investors) of the Permian Basin Royalty Trust. These are the individuals and institutions who own a piece of the Trust and rely on these monthly payments.

Unlike a typical company, there aren't really "employees" or "customers" in the traditional sense that are directly impacted by the Trust's payment changes. The actual oil and gas operations are managed by another company (Burlington Resources Oil & Gas Company LP, in this case), so their employees aren't directly tied to the Trust's payouts.

6. What happens next? (Immediate and future implications)

• Immediate: The next payment you receive (if you're a unitholder) will reflect this new, lower amount of $0.013198 per unit.
• Future for Waddell Ranch: The Waddell Ranch properties will need to generate enough revenue to cover their accumulated "excess costs" before any money from that property can be distributed to unitholders again. This could take some time. Also, information about Waddell Ranch's performance will only be available quarterly, not monthly, making it harder to track.
• Future for Payments: What happens in the months ahead will depend almost entirely on oil and gas prices and how much oil and gas the wells continue to produce from the Texas Royalty Properties. If prices rebound or production increases, future payments could go up. If prices fall further or production declines, payments could drop again.
• No Guarantees: It's important to remember that these payments are not fixed or guaranteed. They fluctuate month-to-month based on market conditions.
• Special Meeting Outcome: Separately, unitholders recently voted in favor of a non-binding proposal to make it easier to amend the Trust's governing document (the Indenture) in the future. While non-binding, the group that proposed it intends to pursue legal action to make this change happen. This could potentially impact how the Trust is governed down the line.

7. What should investors/traders know? (Practical takeaways)

• Expect Volatility: If you own or are thinking of owning units in the Permian Basin Royalty Trust, understand that the payments can swing wildly. It's not like a steady dividend from a big, stable company.
• Waddell Ranch is a Drag: Be aware that the Waddell Ranch property is currently not contributing to distributions and has an "excess cost position" that needs to be cleared. This adds another layer of uncertainty to future payments.
• Watch Oil & Gas Prices: Keep an eye on the news about crude oil and natural gas prices. These are the biggest drivers of the Trust's income. Remember that the prices reflected in the distribution are usually from a couple of months prior.
• Understand the "Royalty Trust" Model: Remember, you're essentially buying a share of future production and its sales. There's no growth strategy or new drilling by the Trust itself. It's a direct pass-through of revenue minus expenses.
• Governance Changes Ahead? Keep an eye on the developments regarding the special meeting and the potential for changes to the Trust's governing documents, as this could affect its long-term structure.
• Do Your Homework: Before investing, make sure you're comfortable with the risks associated with commodity prices and declining asset production.